The growth effect of external debt and FDI in sub-Saharan Africa: The role of institutional quality
Date
2021
Authors
Mark, Robert Kinuthia-
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Much of the literature on the relationship between external debt, FDI and economic growth
focus on the direct effect external debt and FDI has on economic growth. It is difficult to find
research addressing the role of institutions in the relationship between the three variables. This
study aims to investigate the effect institutional quality has on the relationship between external
debt and FDI on economic growth. To achieve this objective, the fixed effects model is
estimated with data from 6 Sub-Saharan African countries over the years 2000 to 2018. The
empirical results find that both the interaction terms between external debt and corruption, and
FDI and corruption to be positive and statistically significant. This confirms the institutional
quality of an economy play a role in the effect external debt and FDI have on economic growth.
It is determined that when countries have stronger institutions, the effect of external debt and
FDI on economic growth is enhanced.
Description
Submitted in partial fulfilment of the requirements for the Degree of Bachelor of Business Science in Financial Economics at Strathmore University